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with regards to the room rate offered by direct and
indirect channels. Therefore, this paper seeks to
conceptualize the importance of price fairness in
relation to the price offered by both channels and
the customers' emotional response as the outcome.
Overall, the rate (dis) parity that exists between
direct and indirect channels is likely to create con-
fusion for the customers. Moreover, this will also
generate another concern, which is the customer's
perception of the price fairness.
2
REVIEW OF RELATED LITERATURE
2.2 Price fairness perception
By definition, Xia, Monroe, and Cox (2004)
explained fairness as to whether the result is con-
sidered as reasonable, acceptable, or just. Stud-
ies with regards to price fairness perception have
been explored widely in marketing research, which
includes hospitality industry as well. Within the
context of hotel industry, price fairness percep-
tion has created a considerable attention by the
researchers and hoteliers due to the rate (dis) par-
ity issues involving direct and indirect channels
(Choi, Mattila, Park & Kang, 2009). The price
dispersion across distribution channels has made
the customers become confused. As a result, this
will drive the customers away from making a
reservation to any particular hotels (Choi et al.,
2009).
Generally, a review of related studies revealed
that customers rated price parity as fair when
applied to both channels (Choi & Mattila, 2009).
It can be said that when the rate parity exists, then
the customers will not be involved in searching the
best price offered in all channels. In fact, research-
ers that had studied within this context had sug-
gested the hotels to have an agreement with their
indirect channels so as to sustain the rate parity
across channels (Gazzoli et al., 2008; Lee, Denizci
Guillet & Law, 2012; Myung et al., 2009).
In another perspective, Taylor and Kimes (2010)
highlighted that the perception of price fairness
may depend on the customers' familiarity with the
pricing practices. For instance, a study by Choi
and Mattila (2009) found that customers who are
not familiar with the differential pricing strategy
had rated the perceptions as unfair. In this case,
the price variation and fluctuation that exist across
channels can be considered as differential pricing
practices. Thus, if the customers are familiar with
these practices, they will evaluate the fairness per-
ception as fair regardless of any distribution chan-
nels, as in the study by Taylor and Kimes (2010).
Another issue of price fairness exists when any
of the distribution channels published their offer-
ings with certain advantages (such as room with
breakfast) at the same price of other channels with
the same offering but with certain extra charge.
Unfortunately, the fairness evaluation is reflecting
the hotel itself rather than their indirect channels.
Thus, this will lead to the customers' emotional
response on the room rates published by both
channels.
2.1 Hotel distribution channels
O'Connor and Frew (2002) defined distribution
channels as a way where customers have been
given enough information at the right time and
place before purchase decisions take place. Since
the development of the electronic marketing, cus-
tomers can gain more information about the room,
rates and their availability (Carroll & Siguaw, 2003)
based from the hotel websites as the direct chan-
nels. On the other hand, the existence of the indi-
rect channels has also assisted the hotels in selling
their unsold rooms to the customers with the same
information provided by the direct channels.
Studies with regards to the hotel room rate
offered through the direct and indirect channels had
portrayed inconsistent results. According to Chris-
tidoulidou, Brewer, Feinstein, and Bai (2007), their
findings from the panel of experts discovered that
the main issues involved were the controlling of the
room rates and the distribution channels. Gener-
ally, a hotel expects their intermediaries offered
the same rate as what had been published in the
direct channels' websites (Demirciftci et al., 2010).
Unfortunately, findings from the previous studies
revealed that the direct channels had quoted the
most expensive room rate as compared to the indi-
rect channels (Tso & Law, 2005). In addition, Law,
Chan, and Goh (2007) also found that the indirect
channels offered the cheapest rate when comparing
to both distribution channels.
On another occasion, a study conducted in the
United States (US) by Gazzoli et al. (2008) por-
trayed that the majority of hotel properties offered
the lowest rate in all of the available distribution
channels. In addition, Toh et al. (2011) further sug-
gested that due to the unsold inventories, hotels
are the most aggressive in reducing the room rate.
Apart from that, hotels have implemented best rate
guaranteed or Best Available Rate (BAR) on their
websites in order to influence the customers that
they are offering the cheapest price as compared to
their indirect channels. Although there are efforts
in creating the rate parity between direct and indi-
rect channels (Gazzoli et al., 2008), yet, it is still
difficult to solve. Uniquely, even though the rate
parity is hard to achieve, but one thing in common
were found in both channels is that they tend to
reduce the room rate as approaching to the arrival
dates (Toh et al., 2011).
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